I need some Foolish advice for a 401(k) plan. My company has a terrible selection of mutual funds. However, they do allow one to open up an account with Schwabb & I can then trade on my own. Currently, after getting slaughtered in the previous company managed fund, my holdings are down to a measly $7000. (I have been investing in this for only one year.)

Here is the problem: With the little cash I currently have, I think any profits of a fool 4 approach will be eaten up by the $30 transaction fee for each buy/sell with Schwabb. My alternate plan was to just stash the dough into an index 500 fund. NOW, if I invest in the Schwabb index fund, there is no fee for the transaction and all of my money will go into the fund, whereas if I invest in the Vanguard 500 fund, there will be a $30 charge. I plan to keep the $ in the fund until I have accumulated about 20k and to start with a foolish 4 based portfolio.

Here is the problem: With the little cash I currently have, I think any profits of a fool 4 approach will be eaten up by the $30 transaction fee for each buy/sell with Schwabb. My alternate plan was to just stash the dough into an index 500 fund. NOW, if I invest in the Schwabb index fund, there is no fee for the transaction and all of my money will go into the fund, whereas if I invest in the Vanguard 500 fund, there will be a $30 charge. I plan to keep the $ in the fund until I have accumulated about 20k and to start with a foolish 4 based portfolio.

My company has one of the Schwab accounts like yours does. I started a Foolish Four portfolio in February with $6000. I did $1500 in each of the companies which came out to a Foolishly recommended 2% transaction fee. I'm reinvesting the dividends and am up for the year ahead of the S&P 500. It's not the 35% gains of the past few years, but it seems to be working.

With a one year turnover (or 18 month if you prefer) I don't think that your profits will be all eaten up, especially if you get a big winner or two. You may end up having one or two stocks stay in the portfolio for another year too which will cut down on transaction fees.

I need some Foolish advice for a 401(k) plan. My company has a terrible selection of mutual funds. However, they do allow one to open up an account with Schwabb & I can then trade on my own. Currently, after getting slaughtered in the previous company managed fund, my holdings are down to a measly $7000. (I have been investing in this for only one year.)

Here is the problem: With the little cash I currently have, I think any profits of a fool 4 approach will be eaten up by the $30 transaction fee for each buy/sell with Schwabb. My alternate plan was to just stash the dough into an index 500 fund. NOW, if I invest in the Schwabb index fund, there is no fee for the transaction and all of my money will go into the fund, whereas if I invest in the Vanguard 500 fund, there will be a $30 charge. I plan to keep the $ in the fund until I have accumulated about 20k and to start with a foolish 4 based portfolio.

With $7K and a charge of $30 per trade it seems to me you have enough now to start a Foolish Four portfolio. In the first year it will cost you $120 to buy the initial shares. That's 1.7% of your portfolo, which is well within the range of the 2% to 2.5% maximum trading costs we adhere to in Fooldom. On average, you will have two buys and to sells on your trading anniversary dates, or four trades for $120. Even if you add no further money to the account, you'll stay within the limit. And, as your account grows those trades will represent less and less as a cost percentage on the portfolio total.